Targeted Stimulus Checks Are an Easier Sell to Lawmakers. Here's How They Could Work

Here's what lawmakers can do to help $2,000 stimulus checks reach those who need that money most.

The coronavirus pandemic has wreaked major financial havoc on countless Americans. Not only have millions lost their jobs over the past nine months, but many families have been forced to deplete their savings accounts and rack up scary levels of debt just to stay afloat. It's for this reason that some lawmakers pushed so hard for a second round of direct stimulus checks -- and why some continue to advocate for a more generous payday.

The most recent round of stimulus checks allowed for $600 per person, which is half of what Americans were entitled to receive under the CARES Act (the relief bill passed in March 2020). Now, lawmakers are calling for $2,000 stimulus checks to help struggling families make a dent in their bills.

There's just one problem -- stimulus checks are earnings-based, but that doesn't necessarily mean the money is getting into the hands of the people who need it the most. While plenty of recipients are using their $600 stimulus checks to pay for essentials like food and medication, others have the luxury of using that money to pad their savings or pay off debt. While those are responsible uses for that cash, they're not its intended purpose. In fact, if lawmakers want to push through a round of $2,000 stimulus payments, they may need to take extra steps to target the country's neediest. Here's how they may be able to pull that off.

1. Lower the earnings thresholds for eligibility

Single tax-filers earning $75,000 or less, and married couples filing jointly earning $150,000 or less, were entitled to a full stimulus payment under both the CARES Act and the more recent $900 billion relief bill signed in December. If lawmakers want to help lower-income households specifically, they can try lowering the earnings threshold for a follow-up stimulus round.

Of course, that could potentially mean cutting off financial aid to jobless workers whose last reported income was higher. For example, say a follow-up stimulus round is based on 2019 income (the last year for which the IRS has tax returns on file at this point), and the income thresholds are lowered to $50,000 for singles and $100,000 for married couples. In that case, an individual with a reported income of $60,000 in 2019 won't get a dime -- even if that same person is currently out of work, or spent the bulk of 2020 out of a job.

2. Base eligibility on 2020 income

A lot of people's financial situations changed for the worse in 2020, so to a large extent, it makes a lot more sense to base stimulus eligibility on 2020 income, not 2019. By making that shift, lawmakers can help ensure that those most impacted by the pandemic get the money they need.

But again, this solution isn't as simple as it may seem. The IRS has yet to begin accepting 2020 tax returns, and the deadline to file them isn't until mid-April. If a third stimulus round is approved sooner, eligible recipients won't want to wait months to get their money.

3. Give unemployment a boost in lieu of a stimulus check

The purpose of stimulus payments is to help those who have been hurt financially by the pandemic -- and it's fair to say that jobless folks fall into that category. One additional solution for more targeted aid could be to give workers on unemployment a one-time boost instead of sending out a round of stimulus checks to the masses.

Of course, this suggestion has its flaws, too. For one thing, implementing that boost could prove difficult given the archaic nature of most states' unemployment systems. Second, not everyone who's experienced income loss is receiving unemployment.

Furthermore, being on unemployment doesn't always equate to financial distress. Take a married couple where one spouse is still working and earning $200,000, and the other spouse lost a $40,000-a-year job and is getting unemployment benefits. That household isn't necessarily hurting so badly if the primary breadwinner hasn't experienced income loss. So to give the unemployed spouse a $2,000 bump defeats the purpose of targeted aid.

Are targeted stimulus checks a real possibility?

Clearly, sending out more targeted aid is no easy feat to pull off, and each of the above solutions comes with its own drawbacks and hiccups. But one thing we do know is that there are many people out there who are struggling to make ends meet even after getting a $600 stimulus payment. And if lawmakers don't find a way to get additional money into the hands of those who need it, a lot of people will land in an absolutely devastating financial situation very soon -- if they're not there already.